The savings market has suffered considerably over the past few years thanks to lending initiatives and a low bank base rate, and the latest research from Moneyfacts.co.uk shows that savings rates have been on a clear downward trajectory as a result.

Since 2011, the average rate on a two-year fixed bond has almost halved, down from 3.20% five years ago to just 1.72% today. A similar pattern can be seen on longer-term bonds, with five-year fixed rates recording a drop from 4.01% to just 2.59% over the same period. Easy access deals have not been left unscathed from poor returns either, with a staggering 75% of the market paying 1% or less.

While challenger banks continue to prop up the savings market, there is still an abundance of rate cuts across the board as providers remain reluctant to compete. This reluctance means that pre-tax earnings on a £10,000 investment made into the average five-year fixed bond today would be £142 a year lower than if the same investment had been made in 2011.*

Rachel Springall, Finance Expert at Moneyfacts.co.uk, said:

“The start of the year brings bad news for savers due to a growing trend of rate cuts. Since the start of 2016, providers cut 140 rates, over six times the number they raised, which stood at a measly 21. Savers may find it difficult to spot any of the big five high-street brands in the savings best buys, which have been increasingly filled with the offerings of challenger banks. If savers are hesitant to invest with these more unfamiliar providers, they could potentially be avoiding the best deals.

“It’s disappointing to see the savings landscape going from bad to worse, with just the challenger banks maintaining an appetite for savers’ cash. These challengers should not have to provide the only crutch for the savings market, but for many months they have been the sole advocates of competition. The impending new bank levy, which is set to come into place this year on challenger banks and building societies, has therefore raised concerns – if the levy affects the competitive savings deals they provide, savers could find it even harder to get a good deal.

“With rates as low as they are today, it’s easy to see why savers may lack an incentive to save, particularly if they rely on their interest for supplementary income. Consequently, they may be wise to look to alternatives instead, such as high interest paying current accounts, which have become increasingly competitive.

“But with base rate set to stay low for some time yet and providers staying focused on pricing down their interest rates for borrowers, savers can do little but sit back and wait for a miracle to happen in the savings market.”

*Pre-tax earnings, not compounded, based on an average rate of 4.01% in 2011 vs. 2.59% today.

www.moneyfacts.co.uk - The Money Search Engine

Moneyfacts.co.uk is the UK's leading independent provider of personal finance information. For the last 20 years, Moneyfacts' information has been the key driver behind many personal finance decisions, from the Treasury to the high street.

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